Emperor Capital Group Ltd. — Capital/Financing Update 2007

Jan 25, 2007

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in LUKS INDUSTRIAL (GROUP) LIMITED, you should at once hand this circular to the purchaser or transferee or to the bank, a stockbroker or other registered dealer in securities or other agent through whom the sale was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

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LUKS INDUSTRIAL (GROUP) LIMITED

(incorporated in Bermuda with limited liability) (Stock Code: 366)

DISCLOSEABLE TRANSACTION

MEMORANDUM FOR PROPOSED ESTABLISHMENT OF A JOINT VENTURE COMPANY IN VIETNAM

19 January 2007

CONTENTS

		Pages
DEFINITIONS	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
**LETTER FROM **	THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		9

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DEFINITIONS

In this circular, unless the context requires otherwise, the following expressions shall have the following meanings:

• “associate” has the meaning ascribed to it under the Listing Rules

• “Board” the board of Directors

“Company” Luks Industrial (Group) Limited, a company incorporated in Bermuda with limited liability, the shares of which are listed on the Stock Exchange

• “Connected person(s)” the meaning ascribed to it under the Listing Rules

• “Director(s)” the director(s) of the Company

• “Group” the Company and its subsidiaries

• “HKSAR”

• the Hong Kong Special Administrative Region of the People’s Republic of China

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

“Hong Phuc” Hong Phuc Investment and Trading Joint Stock Company, a company incorporated in Vietnam with its registered office at 94, Ngo Gia Tu, Buon Ma Thuot City, Vietnam

• “JVC”

• “Land Area”

the joint venture company to be formed by Luks Land Development and Hong Phuc in Vietnam for the purpose of the Project subject to the approvals from relevant authorities in Vietnam having been obtained a land area of approximately 9,934.9 square metres located at Thao Dien Ward, District 2, Ho Chi Minh City, Vietnam which is legally and beneficially owned by Hong Phuc

• “Latest Practicable Date”

• 19 January, 2007 being the latest practicable date prior to the printing of this circular for the purpose of ascertaining and collation of relevant information contained in this circular

• “Listing Rules”

the Rules Governing the Listing of Securities on the Stock Exchange

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DEFINITIONS

• “Luks Land Development” Luks Land Development Limited, a limited company incorporated in the British Virgin Islands and a wholly owned subsidiary of the Company, with its registered office at Offshore Incorporations Limited, P.O. 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin Islands

• “Memorandum” Memorandum of Understanding which has been entered into between Luks Land Development and Hong Phuc on 5th January 2007 for the proposed establishment of a JVC for the Project in Vietnam subject to the terms and conditions therein

• “Model Code” Model Code for Securities Transactions by Directors of Listed Issuers

• “Payment” US$8.55 million (approximately HK$66,690,000), the amount to be paid by Luks Land Development to Hong Phuc for the Land Area to be injected into the JVC, which represents 90% of the share capital of the proposed JVC

• “Project” the development of the Land Area into buildings of residential apartments for the purpose of sale and leasing upon the approvals having been obtained from the relevant authorities in Vietnam

• “SFO” The Securities and Futures Ordinance (Chapter 571 of the laws of HKSAR)

• “Shares” the ordinary share(s) of HK$0.01 each in the issued share capital of the Company

• “Shareholder(s)” holder(s) of the Shares of the Company “Stock Exchange” The Stock Exchange of Hong Kong Limited “US$” United States dollars, the lawful currency of the United States

• “Vietnam” the Socialist Republic of Vietnam “%” per cent

In this circular, except as otherwise indicated, US$ has been translated into HK$ at the rate of US$1.00=HK$7.8 for reference purpose.

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LETTER FROM THE BOARD

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LUKS INDUSTRIAL (GROUP) LIMITED

(incorporated in Bermuda with limited liability)

(Stock Code: 366)

Executive Directors: Mr. Luk King Tin (Chairman) Ms. Cheng Cheung Mr. Luk Yan Mr. Fan Chiu Tat, Martin Mr. Luk Fung

Independent non-executive Directors: Mr. Liang Fang Mr. Liu Li Yuan Mr. Tam Kan Wing

Registered Office: Clarendon House 2 Church Street Hamilton HM11 Bermuda

Principal place of business in Hong Kong: 5th Floor Cheong Wah Factory Building 39-41 Sheung Heung Road Tokwawan, Kowloon Hong Kong 19 January 2007

To the Shareholders

Dear Sir or Madam,

DISCLOSEABLE TRANSACTION MEMORANDUM FOR PROPOSED ESTABLISHMENT OF A JOINT VENTURE COMPANY IN VIETNAM

INTRODUCTION

On 11th January 2007, the Company announced that Luks Land Development, a wholly-owned subsidiary of the Company had entered into a conditional Memorandum with Hong Phuc on 5th January 2007 in connection with a proposal to establish a JVC in Vietnam for the Project with a proposed total share capital of US$9.5 million (approximately HK$74,100,000), which shall be fulfilled by way of injecting the Land Area by Hong Phuc valued at US$9.5 million (approximately HK$74,100,000) into the proposed JVC. Hong Phuc is the existing owner of the Land Area. Luks Land Development shall pay to Hong Phuc US$8.55 million (approximately HK$66,690,000) representing 90% of the share capital of the proposed JVC subject to the terms and conditions set out in the Memorandum and shall own 90% of the share capital of the proposed JVC. Hong Phuc shall own 10% of the share capital of the proposed JVC. Whereas when Laws of Vietnam permit and other conditions having been fulfilled, Hong Phuc shall transfer its 10% shareholding in the JVC

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LETTER FROM THE BOARD

at a price of US$950,000 (approximately HK$7,410,000) to Luks Land Development. The Memorandum is a legally binding agreement. The setting up of the proposed JVC is conditional upon, inter alias, the obtaining of Land Use Right Certificate of the Land Area by Hong Phuc, all necessary written approvals for developing the Land Area into the Project and the licence for the formation of the JVC by the relevant authorities of Vietnam having been granted. The principal business of the JVC after its establishment is for the development of the Project for sale and leasing and the JVC will become a 90% indirectly owned subsidiary of the Company after the JVC having been set up. A formal joint venture agreement will be signed upon all necessary approvals of the Project having been obtained from relevant authorities in Vietnam and other conditions having been fulfilled, the Company will make further announcement upon signing of the formal joint venture agreement.

The Memorandum constitutes a discloseable transaction of the Company pursuant to Chapter 14 of the Listing Rules.

The main purpose of this circular is to provide you with details of the Memorandum.

THE MEMORANDUM DATED 5 JANUARY 2007

1. Parties

• (A) Luks Land Development, a wholly-owned subsidiary of the Company; and

(B) Hong Phuc

On 20 October 2006, the Company has made an announcement that Luks Land Investments Limited, a wholly owned subsidiary of the Company has entered into a conditional agreement on 19 October 2006 for proposed establishment of a joint venture company in Vietnam with CONG TY NHUA NONG SAN THANH PHAT (TNHH) (“Thanh Phat”) as the other party.

To the best knowledge information and belief of the Directors having made all reasonable enquiries, Thanh Phat and its ultimate beneficial owner and Hong Phuc and its ultimate beneficial owner are independent to each other and both parties are also third parties independent of the Company and its subsidiaries and Connected persons of the Company and its subsidiaries. No aggregation of the two transactions is necessary.

2. The Subject Matter

The proposed establishment of a JVC in Vietnam for the Project

3. Total share capital and Payment

The proposed total share capital for the proposed JVC is US$9.5 million (approximately HK$74,100,000), which shall be fulfilled by way of injecting the Land Area by Hong Phuc valued at US$9.5 million (approximately HK$74,100,000) into the proposed JVC. Hong Phuc is the existing owner of the Land Area. Luks Land Development shall pay

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LETTER FROM THE BOARD

to Hong Phuc US$8.55 million (approximately HK$66,690,000) representing 90% of the share capital of the proposed JVC subject to the terms and conditions set out in the Memorandum and shall own 90% of the share capital of the proposed JVC whereas Hong Phuc shall own 10% of the share capital of the proposed JVC. A formal joint venture agreement will be signed upon all necessary approvals of the Project having been obtained from relevant authorities in Vietnam and other conditions having been fulfilled. The title of the Land Area will be vested in the JVC upon all necessary approvals from relevant authorities in Vietnam having been obtained. The schedule of the Payment by Luks Land Development to Hong Phuc is as follows:

• (i) 30% of the Payment, i.e. US$2,565,000 (approximately HK$20,007,000) shall be payable upon the Investment Certificate of the JVC having been granted;

• (ii) 60% of the Payment, i.e. US$5,130,000 (approximately HK$40,014,000) shall be payable upon the Land Use Right Certificate of the Land Area having been granted to the JVC; and

• (iii) the balance of 10% of the Payment, i.e. US$855,000 (approximately HK$6,669,000) shall be payable upon the construction permit having been granted to the JVC.

The Payment will be paid from banks’ borrowing which the Directors believe will not have adverse impact on the Group’s financial position.

To the best estimate of the Directors, apart from the Payment, Luks Land Development is required to extend a loan of approximately US$10 million (approximately HK$78,000,000) to the JVC for fulfilling the development cost of the Project. If the future commitment falls into another category of notifiable transaction, the Directors undertake to comply with the relevant Listing Rules.

The proposed Payment was arrived after arm’s length negotiation between the Company and Hong Phuc. The Directors (including the independent non-executive Directors) consider that the Payment made by the Company for the proposed JVC and the terms and conditions of the Memorandum are fair and reasonable and are in the interests of the Shareholders and the Company as a whole.

Within 14 days after written proof for legal entitlement of the Land Area having been produced by Hong Phuc to Luks Land Development within 7 days of signing the Memorandum and Luks Land Development being satisfied that it may undertake the Project, Luks Land Development shall issue and deliver an irrevocable, non-transferable and non-assignable bank payment guarantee in Vietnam for the sum of US$950,000 (approximately HK$7,410,000) to Hong Phuc for a period of 270 days to guarantee against the unilateral withdrawal and termination of the Memorandum by Luks Land Development which will be released or extended in accordance with the terms of the Memorandum.

The bank payment guarantee is a guarantee for performing the Memorandum and not a payment.

As at the Latest Practicable Date, the Company has not made any of the above payments.

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LETTER FROM THE BOARD

4. Conditions precedent to the Memorandum

The Memorandum is conditional, inter alias, upon:

• (i) Hong Phuc having obtained the Land Use Right Certificate of the Land Area;

• (ii) Hong Phuc having obtained all necessary written approvals for development of the Land Area for the Project by the local government authorities (including but not limited to Ho Chi Minh People’s Committee and other relevant authorities) in Vietnam and written evidence for the payment of the premium and expenses relating to the Land Area having been made; and

• (iii) Formal documents issued by relevant government authorities in Vietnam for approving the establishment of the JVC having been obtained.

Pursuant to the Memorandum, Hong Phuc has guaranteed the total site areas for the Project will not be less than 9,934.9 square metres with density (coverage) for residential areas not less than 34.8% and the numbers of floors for apartment buildings between 22 to 24 floors and the total construction areas for apartments not less than 73,000 square metres. If Hong Phuc cannot meet the guarantee, it will constitute a breach of the Memorandum thus it is required to pay damages to Luks Land Development in accordance with the terms therein.

No valuation of the Land Area has been made and the value is based on arm’s length negotiation with reference to the market price of the apartments in the nearby areas.

When Laws of Vietnam permit, the rights of Luks Land Development and the value of the Project not being adversely affected, Hong Phuc shall transfer its remaining 10% shareholding in the JVC at the original consideration of US$950,000 (approximately HK$7,410,000) to Luks Land Development.

As at the Latest Practicable Date, none of the aforesaid conditions have been fulfilled yet.

5. Information on Hong Phuc

Hong Phuc is a limited company duly constituted and validity existing under the laws of Vietnam and is principally engaged in the land business in Vietnam.

6. Information on Luks Land Development

Luks Land Development is a limited company incorporated in the British Virgin Islands and principally engaged in the land development business.

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LETTER FROM THE BOARD

7. Information on the Land Area and the Project

Hong Phuc is the legal and beneficial owner of a land area of approximately 9,934.9 square metres located at Thao Dien Ward, District 2, Ho Chi Minh City, Vietnam.

Within 7 days upon signing of the Memorandum, Hong Phuc will deliver all written documents including Land Use Rights Certificate of the Land Area to prove its legal and beneficial ownership and will apply to the Vietnamese government to develop the Land Area into a residential property for the Project. After getting the approval of the Project from the government, Hong Phuc will apply to the government to set up a JVC with 90% and 10% shareholding for Luks Land Development and Hong Phuc respectively, to develop the Project.

The preliminary plan of the Project is that blocks of buildings with 22 to 24 floors will be constructed. The total construction areas are 73,000 square metres. However, the detailed plan will be drafted only after the Memorandum having been signed and is subject to the government approval.

8. Reasons for Entering into the Memorandum

The Group is principally engaged in the (i) manufacture and sale of cement products; (ii) property investment; and (iii) manufacture and sale of holistic healthcare products.

In line with the growth pace of the economy and the Group’s strategy in investing in property and infrastructure related business in Vietnam, the Directors believe that it is a suitable timing to increase its investment in residential property development for sale or leasing purpose in Ho Chi Minh City, Vietnam. The management has studied the residential market, including the selling price of apartments around the region of the Land Area and has also studied the cost of constructions and based on those researches and has projected that the Project shall be able to generate good return.

There will be no material effects on the Group’s overall positions on earnings, assets and liabilities until the JVC is formally established. Before the setting up of the JVC, the Group will only be required to issue and deliver an irrevocable, non-transferable and non-assignable bank payment guarantee in Vietnam for the sum of US$950,000 (approximately HK$7,410,000) to Hong Phuc for a period of 270 days to guarantee against the unilateral withdrawal and termination of the Memorandum by Luks Land Development which will be released or extended in accordance with the terms of the Memorandum.

The bank payment guarantee is a guarantee for performing the Memorandum and not a payment.

After the JVC has been set up and upon payment of US$8.55 million (approximately HK$66,690,000) to Hong Phuc, the Group’s overall positions on the assets and liabilities of the Group will increase by US$8.55 million (approximately HK$66,690,000). When a loan of US$10 million (approximately HK$78,000,000) is extended to the JVC, the Group’s overall positions on the assets and liabilities will further increase by US$10 million (approximately HK$78,000,000). It is forecasted that the Group’s overall positions on

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LETTER FROM THE BOARD

income and earnings will increase for the years of 2008 and 2009. The forecast is made based on the assumption that the progress of the Project is on schedule. It is anticipated that construction will start this year and the sale will take place in the year of 2008 whereas the Project will be completed in 2009.

The Board including all the independent non-executive Directors consider that the transaction is on normal commercial terms and the terms and conditions of the Memorandum to be fair and reasonable and are in the interests of the Company and the Shareholders as a whole.

9. Implication under the Listing Rules

The Memorandum constitutes a discloseable transaction of the Company pursuant to Chapter 14 of the Listing Rules.

10. Additional Information

Your attention is also drawn to the general information set out in this circular.

By order of the Board LUKS INDUSTRIAL (GROUP) LIMITED Luk King Tin Chairman

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GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This circular includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this circular and confirm, having made all reasonable enquiries, that to the best of their knowledge, and belief there are no other facts not contained in this circular, the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS BY THE DIRECTORS AND CHIEF EXECUTIVE OF THE COMPANY

As at the Latest Practicable Date, the interests and short positions of the Directors and chief executive of the Company and their respective associates have the following interests and short positions in the Shares, debentures or underlying Shares of the Company or its associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept under section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short position in which he was taken or deemed to have under such provisions of the SFO) and the Model Code.

(i) Long positions in the Shares:

Name of Director Notes Luk King Tin (a) Cheng Cheung (b) Luk Yan (c) Luk Fung Fan Chiu Tat, Martin	Number of shares held, capacity and nature of interest Directly beneficially owned Through spouse or minor children Through controlled corporation 190,479,286 – 57,226,071 18,012,800 – 36,912,027 3,370,800 174,000 – 6,529,600 – – 1,500,000 – – 219,892,486 174,000 94,138,098	Total 247,705,357 54,924,827 3,544,800 6,529,600 1,500,000 314,204,584	Percentage of the Company’s issued share capital 49.55% 10.99% 0.71% 1.31% 0.30%
			62.85%

(ii) Interests in shares of an associated corporation

Long positions in shares of an associated corporation:

						Percentage
						of the
						associated
		Name of	Relationship		Capacity	corporation’s
		associated	with the	Number of	and nature	issued share
Name of Director	Note	corporation	Company	shares held	of interest	capital
Luk King Tin and	(d)	Vigconic	Company’s	2,299,908	Through	25%
Luk Fung		International	subsidiary		controlled
		(Holdings)			corporation
		Limited
		(“Vigconic”)

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GENERAL INFORMATION

Notes:

• (a) Mr. Luk King Tin had a beneficial interest in KT (Holdings) Limited, which held 57,226,071 Shares at the Latest Practicable Date.

• (b) Madam Cheng Cheung had a beneficial interest in CC (Holdings) Limited, which held 36,912,027 Shares at the Latest Practicable Date.

• (c) In addition to the above personal interest, Mr. Luk Yan had a family interest, which held 174,000 Shares at the Latest Practicable Date.

• (d) Mr. Luk King Tin and Mr. Luk Fung had a beneficial interest in Vigconic Biotechnology Company Limited, which held 2,299,908 shares of US$1 each of Vigconic at the Latest Practicable Date.

In addition to the above, certain Directors have non-beneficial personal equity interests in certain subsidiaries held for the benefit of the Company solely for the purpose of complying with the minimum company membership requirements.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors, chief executive nor their respective associates had any interests or short positions in the Shares, underlying Shares or debentures of the Company or any of its associated corporations (within the meaning of part XV of the SFO) as recorded in the register kept by the Company under section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions in which he was taken or deemed to have under such provisions of the SFO) and the Model Code.

3. SUBSTANTIAL SHAREHOLDERS

Substantial Shareholders’ and other persons’ interests and short positions in Shares and underlying Shares

As at the Latest Practicable Date, in accordance with the register of substantial shareholders kept by the Company under Section 336 of the SFO, or to be disclosed under the provisions of Divisions 2 and 3 of Part XV of the SFO and the Listing Rules, the following persons were interested (including short positions) in the shares or underlying shares of the Company:

Long positions:

			Percentage of
	Capacity and	Number of	issued share
Name	nature of interest	Shares held	capital
KT (Holdings) Limited	Directly beneficially	57,226,071	11.45
	owned
CC (Holdings) Limited	Directly beneficially	36,912,027	7.39
	owned

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GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company knew of any person (not being a Director or chief executive of the Company) who had an interest or short position in the Shares or underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who was, directly or indirectly, interested in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other member of the Group or held any option in respect of such capital.

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contracts with any member of the Group which would not expire or would not be determinable by the Group within one year without payment of compensation (other than statutory compensation).

5. COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors or their respective associates has any interests in any company or business which compete or may compete with the businesses of the Group.

6. LITIGATION

As at the Latest Practicable Date, neither the Company nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened by or against the Company or any of its subsidiaries.

7. GENERAL

• (a) The company secretary and the qualified accountant of the Company is Mr. Fan Chiu Tat, Martin, B.Soc.Sc., FCCA, CPA.

• (b) The registered office of the Company is located at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

• (c) The registrar and transfer office of the Company are Tengis Limited at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (d) The principal place of business of the Company is located at 5th Floor, Cheong Wah Factory Building, 39-41 Sheung Heung Road, Tokwawan, Kowloon, Hong Kong.

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